How to Resolve the Error: QuickBooks Balance Sheet out of Balance

QuickBooks Accounting software is a crucial tool for any business. It helps organizations to manage their accounts and pay their bills. But, QuickBooks (QB) is also a complex application and hence prone to errors, as in this case where the app shows an error – “QuickBooks Balance Sheet out of Balance”. Due to this error, the basic equation of “assets = liabilities + shareholder’s equity” fails to match with each other and QuickBooks data displays incorrect 

Analysis of QuickBooks Balance Sheet out of Balance error

An analysis of the QBWin.log file indicates that the “Inventory Asset Account” experiences the error when the calculated balance and displayed balance for an account are not equal. The primary cause of Balance sheet error are:

Data Damage
The Company File gets damaged during the transaction entry. For example, the current fiscal year reports an out-of-balance transaction. Such damage can be fixed using the following methods - re-sort the list or rebuild the data for that fiscal year.

Incorrect Linking or Transaction entry
Data entries may appear to be entered correctly, but these may push the cash basis ‘out-of-balance’. These entries may include the following:

• Use of credit memos for returned inventories
• Discounts for jobs
• General journal entries

Any of these entries may offset other transactions. Such issues can be fixed only manually, and the process includes - locating, verifying and correcting individual entries. 

Multiple-currency usage
The multi-currency issue is quite common amongst QuickBooks users. When the exchange rate of the payment does not match the exchange rate when the invoice was created, it results in a multi-currency issue. For such transactions, the gain or loss caused due to the difference in the exchange rate does not reflect in the balance-sheet resulting in out-of-balance-error.
This issue requires significant modification of the software and QuickBooks is in the process of resolving the multi-currency usage issue. Till that time, using a reliable Repair for QuickBooks software is the only solution to fix “Balance sheet out of Balance Error.”

Solutions to resolve QuickBooks Balance Sheet out of Balance error

Always check for the following before starting to resolve the QuickBooks error:

1. Backup QuickBooks data – QuickBooks involves processing and storing of crucial data. Hence all data must be backed up before beginning to fix the error.
2. Troubleshoot on server computer if multiple users use QuickBooks data. The reason is if changes are made on the local machine, these will not reflect on a central location, which may not help resolve the error.
3. Verify if this is a recurring error. Then the issue may be that the display is slow in refreshing the report or the problem is with the default date. Logout of QuickBooks file and log in again and change the default date.
4. Use the basic troubleshooting for data damage. Many times, issues are resolved with the help of simple steps like “Run the rebuild and verify data utilities”. Next, reopen the balance sheet and check the balances. If the problem persists, resolve the issue of “QuickBooks Balance Sheet out of Balance error” with the help of QuickBooks repair tool. 

QuickBooks Balance Sheet out of balance error may occur due to changes in any of the following data types:

1. Transactions
2. Customer Report
3. Vendor Report
4. Journal Report
5. Other Transactions

All Accounts professionals are apprehensive about sharing their organization’s data. And they are no programmers who can run developer’s code to fix the issue. In that case, the best way to resolve the problem is to check for all the alterations and resolve the issue manually by following the below-given instructions. However, manual procedures are lengthy and involve time and efforts. If time is not the constraint, then try the manual methods, else employ a software. 

The solution to fix the transaction value and resolve Balance Sheet out of Balance error

Step 1. To fix the transaction manually, you need to determine the date when the Balance sheet shows the error

1. In the QuickBooks application, go to Reports menu, then select Company & Financial ->Balance Sheet Summary.
2. Select Customize Report, available in the upper left of the Summary Balance Sheet window
3. Set the Report basis to Cash
4. Narrow down the search for Date Range and change the columns to determine when the Balance Sheet show out of balance
5. As it involves a manual transaction, then the steps should be performed for all of the following: Year, Month, Week, Day

The process of “year is explained in detail. If the accounting data does not show results for that fiscal year, then repeat the same steps for “Month”, “Week” and “Day”, replacing the “Year” with these values.

• Go to Dates drop-down and select All
• From the display column of drop-down, select Year
• Click OK.
• Compare the Total Assets and Total Liabilities to find the year the Balance Sheet goes out of balance.
• Proceed to Month (followed by “Week” and “Day”, if the results are not satisfactory)

Step 2. Locate the transaction causing the issue
Once the Year/Month/Week/Day for the transaction causing the problem is identified, the next step creates a “Custom Transaction Detail Report” to identify the transaction/s causing the “Balance Sheet out of balance error”.

1. Click “Reports” from the menu, and select Custom Report > Transaction Detail.
2. The “Modify Report” window opens. If the window doesn’t open, select Customize Report and click “Display” tab
3. Under “Report Date Range”, in the “From and To” fields, type the “date” when the Balance Sheet went out of balance. For example: From = 4/14/00 To = 4/14/00.
4. Set the Report Basis to Accrual
5. Under “Columns”, uncheck the following – “Account”, “Split”, “Clr”, and “Class” (if Class is present), and check “Amount”. This makes the report more comfortable to read.
6. Click “OK”. The ending balance on this report should be out of balance amount.
7. Check the Amount column for a transaction that equals the ending balance of the report. If there is a single transaction that matches the ending balance, proceed to step 3. If not, proceed to step 2.

Sometimes, there is difficulty finding the transaction which causes the discrepancy. Run the following Reports to check the transaction:

• Customer Report
• Vendor Report
• Journal Report
• Other Transactions

Customer Report

1. Go to the “Reports” menu, then select “Custom Reports à Transaction Detail”.
2. The “Modify Report” window opens. If it doesn't, select “Customize Report”, and go to the “Display tab”. On the Display tab:
3. Set the “Report Basis” to “Accrual”.
4. Set the “From” and “To” fields for the period; the Balance Sheet goes out of balance.
5. Set “Total” to Customer.
6. Select “Filter tab”, and on the Filters list, select Transaction Type.
7. From the “Transaction Type” drop-down, select Multiple Transactions and mark Invoice, Credit Memo, and Payment
8. Click OK
9. If the total amount is by which the Balance Sheet went out of balance on this date: locate the customer with non-zero (positive or negative) sub-total. This is the customer with damaged transactions.
10. If the total amount is non-zero (positive or negative) but not that amount by which the Balance Sheet went out of balance on this date then add other transactions to the Transaction Type filter such as Journal Entries and Checks.

Vendor Report

1. Select Reports menu followed by Custom Reports ->Transaction Detail.
2. “Modify Report” window opens. If it doesn't open, select Customize Report, and proceed to the “Display” tab.
3. On the “Display” tab: a. Set the Report Basis to Accrual. b. Set the From and To fields to the day the Balance Sheet goes out of balance. c. Set Total by to Customer.
4. Go to the Filter tab, and perform the following steps: a. Go to Filters list and select Transaction Type. b. From the Transaction Type drop-down, select Multiple Transactions, then mark Bill, Bill Credit, and Bill Payment. c. Click OK.
5. If the total amount is by which the Balance Sheet went out of balance on this date: Find the vendor with non-zero (positive or negative) sub-total. This vendor has damaged transactions.
6. If the total is non- zero (positive or negative) and not the amount by which the balance sheet went out of balance on this date then add other transactions to the Transaction Type filter such as Journal Entries.

Journal Report

1. In the “Reports” menu, select “Accountant and Taxes”-> “Journal”.
2. Select “Customize Report” and go to the “Display tab”.
3. Set the “Report Basis” to “Accrual”.
4. Set the “From” and “To” fields to the day the Balance Sheet goes out of balance.
5. Click “OK”.

Note: The Debit and Credit Totals won't match which confirms that you have the valid date when the Balance Sheet is out of balance. You need to find the specific transaction/s that show the debit total not matching with the credit total, or that one of its accounts is blank under the Account column. Open that transaction, then delete or recreate it as necessary.

Other transactions

1. Go to the Reports menu, then select Custom Reports > Transaction Detail.
2. “Modify Report” window opens automatically. If it doesn't, select Customize Report, and go to the Display tab.
3. On the Display tab: a. Mark the Report Basis to Accrual. b. From the Dates drop-down, select All. c. Set Total by to Account List. d. From the Columns list, mark Item.
4. Click OK.
5. Scroll to the bottom of the report. If the last group of transactions has No account as heading and consists of blank Account column, then there are no accounts assigned to transaction targets. To fix this: a. Go to the Lists menu and select Item List. b. Right-click “item” and select Edit Item. c. Change the Account and Click OK. d. Repeat steps ii and iii change the Account back to the original account. Click OK.
6. Repeat step e for each transaction that doesn't have an account.

Step 3. Determine the transaction which puts the Balance Sheet out of balance
A few transaction types are listed below. These transactions are further categorized into sub-categories based on scenarios. Check the scenarios and their recommended fix for each category:

1. An Inventory return with a discount on the invoice

Possible Scenario

Recommended Fix

1. One or more inventory items are sold
2. Customer returned one or more inventory items.
3. Invoice has a discount item.

Create a new invoice for the sale and the discount.

Create a credit memo for the inventory return.

Link the credit memo to the invoice in Receive Payments.

1. A discount provided at the customer level and applied at the job level

Possible Scenario

Recommended Fix

1. Accounting data consists of a customer with several jobs. You completed all of the jobs and invoiced the customer, including all the tasks on one invoice.
2. Payment was received for an invoice, but the customer included a discount for Job A in the payment.
3. A payment is recorded against the invoice, and the discount is entered on the Discount/Credit tab.

Re-enter the payment and break it amongst the jobs. Next, enter the discount at the job level to match the invoice.

1. A journal entry is linked to the credit memo

Possible Scenario

Recommended Fix

1. For an open Credit Memo: you entered an offsetting General Journal Entry (GJE) and linked it to the Credit Memo.

Edit the Journal Entry (GJE)

Move the A/R account to the source line, say the first line of the GJE.

Save GJE entry and ensure that it is linked to the Credit Memo.

1. A discount that offsets to a Balance Sheet account

Possible Scenario

Recommended Fix

1. Recorded a discount and then used a Balance Sheet account to offset the discount.

Transform the discount account to an income or expense account. If you are instructed by your accountant to use a Balance Sheet account and it is essential that you use Accrual basis reporting, then use the following workaround:

Offset the recorded discount to an expense account

Write a journal entry and move the discount from the “Expense Account” to the “Balance Sheet” account.

1. The unconventional inventory transactions

Possible Scenario

Recommended Fix

The unconventional inventory transactions are listed below:

Transactions that adversely affect inventory. Such operations are:

• That drives the Quantity on Hand as negative.
• That alters the Quantity on Hand to previously entered assemblies thus causing the meetings to be marked pending.
• With positive (+) and negative (-) units of the same item on the same price.
• That involves a damaged item, damaged customer, or a damaged vendor.

A negative inventory affects the Cash Basis Balance Sheet. While performing basic data damage troubleshooting on the company file, the Balance Sheet becomes out of balance when the inventory transactions are entered again.

Sometimes, correct transactions may cause the Balance Sheet to be out of balance, which may affect financial statements for previous periods also. In that case, create a new data file.

If the issue started after upgrading the QuickBooks to the new version :

• Reinstall the old version.
• Restore from the backup created before upgrading.
• Upgrade the restored data file
• Upgrade the QuickBooks data again into the new version.

If the transaction still appears to be damaged, or it is causing the imbalance, then recreate the transaction.  

Possibly, by now the transaction causing the issue of “Balance Sheet out of balance error” is identified. If not then resolve the problem using the software.

Conclusion

For Finance professionals, fixing the “Balance Sheet out of balance error”, manually may sometimes prove quite gruelling and time-consuming. Approaching QuickBooks to troubleshoot the issue is not the right solution as it involves sharing the crucial data outside the organization. Also, QuickBooks data will remain unavailable until the issue resolves.

Trying to resolve the error with the help of a reliable QuickBooks repair software is the most realistic solution. The reason is software repairs the data and makes it available within no time. The data remains within the organization. As the software supports issues arising due to all the problems - Data Damage, Incorrect Linking or Transaction entry and Multiple-currency usage, it proves to be a feasible approach to resolve the error.